Close your eyes. No, wait, then you can’t read this. Okay, imagine yourself at age 65. What is your life like? Are you filling your passport with stamps? Are you a regular at the diner down the street? Maybe you’re turning a hobby into a second career? No matter what you envision for your retirement, it’s likely that you haven’t thought of everything you need to make it all happen.
Here’s an eye-opening factoid: 71% of Americans age 35 to 44 have between $0 and $50,000 in retirement savings(source: Consumer Finances).
Thanks to better health care, advanced technology, and more active lifestyles, people are living longer, healthier lives. Many of us will spend over 25 years in retirement, placing us at risk of outliving our savings, and making it all the more important that we’re saving enough.
Set a Goal
Experts suggest you may need to replace 80 to 100% of your income in retirement. Assuming you’ll spend 25 years in retirement, take your average salary and multiply it by 25 (someone who earns $60,000 a year would need $1.2 to $1.5 million in retirement). Of course, this number will vary based on your needs, but this is a good start. You can download a Retirement Expense Worksheet here to start pinpointing exactly how much you'll need in retirement.
Many experts agree that an average person should be saving 15% of their salary for retirement (this 15% includes both employee and employer contributions). The sooner you start saving, and the more you save earlier in life, the more the power of compounding will work for you. If you’re starting later, you may need to step on the gas to close the gap.
Don't Throw Away Money
Are you leaving money on the table? If your employer offers contributions such as a matching program and profit sharing, not participating is like throwing away a paycheck every year. Don’t do that.
Mix it Up
Once you contribute enough to get the company match, consider other options to reach saving 15% of your income. Creating the right mix of investments – and balancing your risk tolerance – can pay dividends throughout your investing life. This Risk Tolerance Questionnaire can get you headed in the right direction. It’s good to work with an expert financial planner to choose the best fit based on your unique situation and ultimate goals. They’ll help you revisit your objectives, evaluate your progress, and make adjustments as needed. You’ll be much more likely to reach the retirement you really want. After all, you deserve it.